Original Date Announced

Pursuant to Executive Order 14218, the Treasury Department's General Counsel issued a memorandum concluding that refunded portions of refundable income-tax credits, as a class, were benefits to taxpayers within the meaning of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). The memorandum relies, in part, on a 2020 opinion by the Department of Justice (DOJ) Office of Legal Counsel (OLC) finding that it is reasonable to conclude that the refundable portions of the Earned Income Tax Credit (EITC), Additional Child Tax Credit (ACTC), and American Opportunity Tax Credit (AOTC) are "Federal public benefits" under PRWORA that are generally unavailable to "non-qualified aliens." The new memo adds the Premium Tax Credit and Saver's Match credit to the list of credits many such noncitizens may be ineligible for under PRWORA and suggests that the same may be true of other refundable individual-income-tax credits not specifically listed.

Trump 2.0 [ID #2327]

Subsequent Trump and Court Action

2026.08.20 Dept of Treasury and IRS NPRM - Application of the PRWORA to the Refunded Portion of Certain Federal Refundable Tax Credits

The Treasury Department and the IRS published a proposed rule that would treat the refunded portion of the earned income credit (EITC), additional child tax credit (ACTC), American opportunity tax credit (AOTC), and adoption credit as a “Federal public benefit” under PRWORA. Noncitizens who are not “qualified aliens” could use these credits to reduce their tax liability to zero but could not receive any refund above that. Claimants would have to certify their status under penalty of perjury, and eligibility would be determined on the date the return claiming the credit is filed. Treasury estimates that 200,000 to 700,000 taxpayers would lose $0.7 billion to $2.6 billion for tax year 2026.

Subsequent Trump and Court Action

2026.08.20 IRS Draft Form 1040 (Schedule 3-A) - Federal Public Benefit

The IRS issued a draft Schedule 3-A (Form 1040), titled "Federal Public Benefit," which would implement the August 20 proposed rule's requirements (see above) once finalized. The schedule includes a certification requirement and must be filed by anyone claiming one of the four affected credits. It calculates the “federal public benefit,” meaning the refundable credits in excess of tax liability. It then asks whether the filer wants to receive that benefit and whether the filer or spouse is a citizen, national, or qualified alien. A “no” to either question removes the benefit amount from the filer’s refund.